Question: You have the following utility function ln(W), where ln() refers to natural log and W to wealth. Your wealth is 50 000 euros. You are

You have the following utility function ln(W), where ln() refers to natural log and W to wealth. Your wealth is 50 000 euros. You are currently facing a gamble where you may lose 33 000 euros. The probability of you losing is 60/100,000 (i.e., 0.0006).

Calculate the certainty equivalent of the gamble. Turbo Health and Living, an insurance company, is offering to insure you against the risk for mere 25 euros. Regardless of their persuasiveness, should you buy the insurance?

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